Ecuador $9.5 bln ruling against Chevron was corrupt -U.S. judge

Source: Reuters - Tue, 4 Mar 2014 23:55 GMT

Author: Reuters

By Joseph Ax

NEW YORK, March 4 (Reuters) - An American lawyer used "corrupt means" to secure a multi-billion-dollar pollution judgment against Chevron Corp in Ecuador, a U.S. judge ruled on Tuesday, a major setback for Ecuadorean villagers hoping to collect on the award.

U.S. District Judge Lewis Kaplan in New York said he found "clear and convincing evidence" that attorney Steven Donziger's legal team used bribery, fraud and extortion in pursuit of an $18 billion judgment against the oil company issued in 2011.

The villagers had said Texaco, later acquired by Chevron, contaminated an oil field in northeastern Ecuador between 1964 and 1992. Ecuador's high court cut the judgment to $9.5 billion last year.

But regardless of whether there is pollution at the site, Kaplan said, Donziger cannot use a "Robin Hood" defense to justify illegal behavior.

Kaplan's decision bars Donziger and the villagers from enforcing the Ecuadorean ruling in the United States. It may also give Chevron legal ammunition in other countries where the plaintiffs could try to go after Chevron's assets.

At a six-week trial last year, Chevron accused Donziger of fraud and racketeering and said Texaco cleaned up the site, known as Lago Agrio, before handing it over to a state-controlled entity.

Donziger, who has repeatedly leveled accusations of bias against Kaplan and who predicted he would lose the case, called Tuesday's decision "appalling" and blamed Kaplan's "implacable hostility" toward him and his Ecuadorean clients.

"Through this decision, we now have the spectacle of a Manhattan trial judge purporting to overrule Ecuador's Supreme Court on questions of Ecuadorean law," he said in a written statement. He vowed to appeal and said the ruling would not stop his clients from seeking to enforce the judgment in other countries.

Chevron no longer has significant assets in Ecuador, and the villagers have tried to enforce the ruling in Canada, Argentina and Brazil.

Chevron Chief Executive John Watson said the ruling was "a resounding victory."

The company is expected to use Kaplan's decision to defend itself against claims abroad. In a statement, the company said, "Any court that respects the rule of law will find the Lago Agrio judgment to be illegitimate and unenforceable."

Chevron and Ecuador also remain locked in an arbitration dispute in international court over cleanup costs at the site.

In Washington, the Ecuadorean embassy said in a statement that the decision "does not exonerate Chevron from its own legal and moral responsibilities resulting from its decades of contamination."

'VOLUMINOUS' EVIDENCE

The decision caps a years-long battle in U.S. courts between Chevron and Donziger, pitting the company's vast resources against a lawyer who argued he was the victim of an unscrupulous corporation.

But Kaplan found that the evidence against Donziger was "voluminous," including things like coded emails, secret payments and clandestine meetings with judges that "normally come only out of Hollywood."

Kaplan said Donziger began pursuing the case with intentions to improve environmental conditions in Ecuador and make a living for himself, but ultimately corrupted the case by submitting fraudulent evidence, bribing a judge, ghost-writing the judgment and covering up his wrongdoing.

"The saga of the Lago Agrio case is sad," Kaplan wrote.

The judge said Texaco, and by extension Chevron, "might bear some responsibility" for pollution at the site but that it was irrelevant to the question of whether fraud had occurred.

"Justice is not served by inflicting injustice," Kaplan wrote. "The ends do not justify the means. There is no 'Robin Hood' defense to illegal and wrongful conduct."

During the non-jury trial, which ended in November, Kaplan heard from 31 witnesses and considered written testimony from 37 others. Chevron also introduced reams of documents, including Donziger's personal notebook, purporting to show that he was involved in a wide-ranging fraud.

Among the witnesses was the former Ecuadorean judge who issued the 2011 judgment, Nicolas Zambrano, who testified that he had received no money and had written the opinion without outside assistance.

But Kaplan agreed with Chevron that the evidence showed Zambrano did not write the ruling himself. Instead, Kaplan, said, the plaintiffs' team wrote the judgment, and Zambrano simply signed his name to it.

Another former Ecuadorean judge, Alberto Guerra, testified that Donziger's team paid him to ghost-write Zambrano's opinion. Donziger's lawyers pointed out that Chevron had compensated him for testifying and paid for his family's living expenses.

Chevron's lawyer, Randy Mastro of Gibson Dunn, pointed to sections of the ruling that appeared to be copied word-for-word from internal documents held by Donziger's team in Ecuador as proof, saying they were "like fingerprints."

The case is Chevron Corp v. Steven Donziger et al, U.S. District Court for the Southern District of New York, No. 11-0691.

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